LONDON MARKET PRE-OPEN: Spectris launches GBP300 million share buyback

(Alliance News) - Stock trading in London is set for a downbeat return following the long Easter weekend, with traders mulling global growth prospects.

In early UK company news, Pearson kept its guidance unchanged, despite saying a contract with Arizona State University will end next year. Spectris unveiled a divestment and share buyback. JTC lifted its dividend.

IG futures indicate the FTSE 100 index will open down 1.68 points at 7,614.70 on Tuesday. The blue-chip index closed up 35.58 points, or 0.5%, at 7,616.38 on Thursday last week.

The IMF is due to release its updated economic forecasts on Tuesday, which Managing Director Kristalina Georgieva last week said will further downgrade the estimate for global growth that was cut to 4.4% in January. On Monday, China reported 4.8% economic growth in the first quarter of 2022.

The World Bank is seeking to create a USD170 billion emergency fund to help the poorest nations being buffeted by multiple crises, the bank's President David Malpass said Monday.

Speaking ahead of this week's spring meetings of the IMF and World Bank, Malpass said the 15-month aid fund would run through June 2023 and build on the USD157 billion Covid-response fund, which expired in June 2021.

"With the return of European markets from the long Easter weekend break we look set to get off to a negative start in the wake of yesterday's lower finish for US markets, amidst concerns that the growth downgrades...could well be the first of many," said Michael Hewson, chief market analyst at CMC Markets.

Wall Street posted modest losses on Monday with the UK and most of Europe closed. The Dow Jones Industrial Average slipped 0.1%, the broad-based S&P 500 lost 0.90 of a point, and the tech-rich Nasdaq Composite Index declined 0.1%.

In early UK company news, educational publisher Pearson said its Online Program Management partnership with Arizona State University will end in June 2023.

"The profit impact of the contract termination will be modest in 2022 and 2023 and will be offset thereafter through eliminating related costs and re-directing investment across our strategic growth opportunities," the FTSE 100-listed company said.

Pearson stressed its financial guidance for the current financial year remains unchanged, as does its medium-term outlook.

Pharmaceutical firm AstraZeneca said Enhertu has been granted priority review in the US for patients with unresectable or metastatic non-small cell lung cancer whose tumours have a HER2 mutation and who have received a prior systemic therapy.

Enhertu is a HER2-directed antibody drug conjugate being jointly developed by Astra and Daiichi Sankyo.

The priority review follows breakthrough therapy designation granted by the US Food & Drug Administration for Enhertu in this cancer type in May 2020.

Spectris, a supplier of precision instrumentation and controls, said it has sold Omega Engineering to Arcline Investment Management for USD525 million, strengthening its balance sheet and paving the way for a share buyback.

Specialist sensors provider Omega generated sales of GBP129.0 million in 2021 and adjusted Ebitda of GBP19.7 million.

"With new management and a revised strategy launched in 2020, Omega ended 2021 with a strong order book and well positioned for future growth; expecting to return to pre-Covid levels of revenue this year. We have been clear that scale is essential to deliver acceptable levels of profitability at Omega. As such, we believe that Omega's next stage of development can be better fulfilled with the scale provided as part of a larger group," said Spectris.

Spectris said its "enhanced" balance sheet following the sale leaves it well places to take part in further investment activity. In addition, the firm unveiled a GBP300 million share buyback programme, with an initial tranche of GBP150 million to start shortly.

"Today's announcement is yet a further example of our approach to optimising our assets and successfully divesting businesses at multiples higher than the group as a whole. This disposal, in conjunction with the share buyback programme, delivers clear value for shareholders, whilst also allowing us to take advantage of new growth opportunities for our core businesses, in line with our purpose," said Chief Executive Andrew Heath.

Kainos said trading in its recently ending financial year was strong, with results to be in line with consensus forecasts.

The computer software firm said new and existing clients maintained or increased their levels of investment in digital solutions in the year ended March 31.

"Looking ahead, our robust pipeline, strong balance sheet and significant contracted backlog underpin our confidence in our outlook. As a result, we believe that we are well-positioned for further growth and remain confident in our strategy," the company said.

Fund management company JTC hiked its dividend after revenue and profit growth in 2021, with acquisitions helping to boost performance.

Revenue for 2021 grew 28% to GBP147.5 million from GBP115.1 million in 2020, and pretax profit jumped to GBP27.8 million from GBP11.2 million. Annualised new business wins totalled GBP20.9 million, up from GBP17.9 million in 2020.

The revenue growth reflected strong net organic growth of 9.6% plus inorganic growth of 19%, the firm said.

"2021 saw JTC execute on its inorganic growth strategy with seven high quality acquisitions completed in the year - the most we have ever achieved in a single calendar year. The quality businesses in Segue, SALI and EFS, also supported our strategic push into the US," said Chief Executive Nigel Le Quesne.

JTC has been pleased with the integration and business performance of recent acquisitions, with all seven "on track", it said.

"While much of the focus will be on improving and integrating what we have, we also remain of the view that the sector is primed for consolidation and that our proven approach to identifying, securing and integrating high quality acquisitions is a key part of creating long-term value for JTC and our stakeholders," the company said.

JTC lifted its dividend for the year by 14% to 7.67p from 6.75p in 2020.

Ideagen noted Cinven's announcement on Thursday last week and confirmed it has not received a takeover approach.

Private equity firm Cinven had said it was in the early stages of mulling a takeover bid for AIM-listed Ideagen. Cinven said no approach had been made to the information management, safety, risk and compliance software provider's board yet, and there could be no certainty an offer will be made.

Cinven has until the close of play on May 12 to announce whether it plans to make a firm offer or not.

In Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.7%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was down 2.4%. The S&P/ASX 200 in Sydney ended up 0.6%.

Figures on Monday showed China's economic growth accelerated in the first quarter of the year to 4.8%, but the government warned of "significant challenges" ahead while massive Covid-19 lockdowns started to bite.

The world's second-biggest economy had lost steam in the latter half of last year with a property slump and regulatory crackdowns, pulling down growth. But it exceeded expectations in the first three months of 2022, growing 4.8% on-year, the National Bureau of Statistics said, with Lunar New Year spending and factory production cajoling growth.

The weeks ahead, however, appear treacherous for the economy with Beijing's unrelenting zero-Covid approach to outbreaks clogging supply chains and locking down tens of millions of people – including in the economic dynamos of Shanghai and Shenzhen as well as the northeastern grain basket of Jilin.

The dollar was stronger early Tuesday.

The pound was quoted at USD1.3008, falling from USD1.3060 Thursday and slipping below USD1.30 earlier Tuesday. The euro was priced at USD1.0781 on Tuesday, down from USD1.0797 late Thursday. Against the yen, the dollar was trading at JPY128.16, up from JPY125.91.

Gold stood at USD1,975.90 an ounce, up from USD1,964.54 late Thursday. Brent was quoted at USD112.13 a barrel, up from USD107.52.

The economic calendar gets off to a quiet start on Tuesday, before producer price figures from Germany on Wednesday, eurozone inflation data on Thursday, and then UK retail sales and a host of PMIs on Friday.

By Lucy Heming; lucyheming@alliancenews.com

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